PNB fraud, global cues spur Rs10,000 crore FPI sell-off in February
Foreign investors have pulled out nearly Rs10,000 crore from the Indian markets so far in February primarily due to Rs11,400 crore PNB fraud
New Delhi: Foreign investors have pulled out nearly Rs10,000 crore ($1.5 billion) from the Indian stock market so far this month primarily due to the PNB fraud jitters coupled with global cues.
This is against the total inflow of over Rs13,780 crore by foreign portfolio investors (FPIs) in January, latest data with the depositories showed.
Geojit Financial Services Head of Research Vinod Nair said weak domestic cues impacted investors’ sentiment. Besides, renewed concerns that a rebound in global crude oil prices will have an adverse impact on fiscal deficit too kept market participants cautious, he added.
State-run Punjab National Bank had on 14 February disclosed a Rs11,400 crore ($1.77 billion) worth of fraud involving jewellers Nirav Modi and Mehul Choksi and their group firms. According to depositories data, FPIs withdrew a net amount of Rs9,899 crore ($1.5 billion) from equities during 1-23 February. However, they put in over Rs1,500 crore in the debt markets during the period under review.
“In January, the US unemployment rate stood at a 17-year low of 4.1%. In addition to this, there is a good possibility of an increase in the US Federal Reserve rate to counter the rise in inflation. Overall, we witnessed a sell-off globally. The FPI pullout from Indian markets is most likely a result of this,” Harsh Jain, co-founder and COO of online investment platform Groww, said.
Echoing similar views, Nalini Jindal, chief investment advisor at Intellistocks, said the US inflation is hitting several years low, raising possibility of a hike in the Fed rate, and this has resulted in a caution among FPIs.
“The recent budget announcement to tax long-term capital gains and bringing FPIs into local compliance are some of the reasons as FPIs may want to book some profits to enjoy the benefits of grandfathering. This, however, could be a short-term scenario as India is one of the much sought after destinations for investments by FPIs,” she added.
Explaining the reason for inflow in the debt markets, Jain said: “India’s 10-year bond yield crossed 7.5 %, the first time since July 2016. Similar is the case with the 10-year treasury yield. The inflow in debt market is expected when the arbitrage between the selling debt and buying equity squeezes.”